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What is a bridge?
Blockchain bridges work just like the bridges we know in the physical world. Just as a physical bridge connects two physical locations, a blockchain bridge connects two blockchain ecosystems. Bridges facilitate communication between blockchains through the transfer of information and assets.
The following examples can explain:
You are from China and are planning a trip to Europe. You have renminbi, but you need euros to spend. To convert your Chinese yuan to euros, currency exchanges can be used for a small fee.
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Why do you need a bridge?
All blockchains have their limitations. Ethereum scales and keeps up with demand using rollups. Meanwhile, L1s like Solana and Avalanche sacrifice some decentralization to achieve higher throughput.
However, all blockchains have developed in silos with different rules and consensus mechanisms. This means they cannot communicate natively, nor can tokens move freely between blockchains. Bridges exist to connect blockchains, allowing information and tokens to be passed between them.
Functions of the bridge:
Cross-chain transfer of assets and information
Enables dapps to take advantage of various blockchains (as protocols now have more room for innovative design).
Allow users to access new platforms and enjoy the advantages of different chains.
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What are the usage scenarios of blockchain bridge?
With the bridge, you can enjoy lower transaction fees
Say you have ETH on the Ethereum mainnet, but want cheaper transaction fees to explore different dapps. By bridging your ETH from mainnet to Ethereum L2 rollup, you can enjoy lower transaction fees.
With the bridge, dapps on other chains can be explored
If you have been using Aave to lend USDT on the Ethereum mainnet, but using Aave to lend USDT on Polygon has a higher interest rate.
Explore the blockchain ecosystem
If you have ETH on Ethereum mainnet and you want to explore an alt L1 to try their native dapps. You can use the bridge to transfer your ETH from the Ethereum mainnet to the alt L1.
Own native encrypted assets
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Types of Blockchain Bridges
There are many different types of designs for blockchain bridges. Generally, bridges fall into two categories: trusted bridges and untrusted bridges.
trusted bridge: Trusted bridges rely on a central entity or system to operate; they have trust assumptions about the custody of funds and the security of the bridge; users mostly trust the operator.
Bridge to Trust:Trustless bridges run using smart contracts and algorithms; they are trustless, i.e. the security of the bridge is the same as that of the underlying blockchain; through smart contracts, trustless bridges enable users to control their funds.
Here are the definitions of these terms:
Trustless: Has the same security as the underlying domain.
Trust assumptions: Remove security from the underlying domain by adding external validators to the system. Thus reducing the security of the crypto-economy.
To better understand the main difference between these two approaches, let us take an example. Imagine you are at an airport security checkpoint. There are two types of checkpoints:
manual checkpoint- A staff member manually checks your ticket and all details of your identity before handing over your boarding pass.
self check-in- Operated by a machine where you enter your flight details and receive your boarding pass once everything has been checked.
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Risks of using blockchain bridges?
Bridging is in the early stages of development. It is likely that the best bridge design has not yet been discovered. Interacting with any type of bridge has risks:
Smart contract risk - bugs in the code will cause loss of user assets
Technical risk - software glitches, buggy codes, human error, spam and malicious attacks can disrupt user operations
Also, because trusted bridges increase trust assumptions, they introduce additional risks such as:
Censorship risk - the operator of the bridge could theoretically prevent users from using the bridge to transfer assets
Escrow risk - bridge operators can collude to steal users' funds
User funds are at risk if:
There is a bug in the smart contract
user error
The underlying blockchain is attacked
The operator of the bridge is acting maliciously in the trusted bridge
bridge hacked
The most recent hack was Solana's Wormhole Bridge, where 120k wETH ($325 million) was stolen during the hack. The blockchain bridge is not only crucial for users to log in to Ethereum L2s, but also for users who want to explore different blockchain ecologies. However, users must weigh their use given the risks involved in interacting with the bridge.
Original: https://ethereum.org/en/bridges
